LifeLock Announces 2014 Third Quarter Results

Record quarterly revenue of $123.0 million, up 29% year-over-yearQ3
cumulative ending members of approximately 3.52 million, up 23%
year-over-yearQ3 monthly average revenue per member of
$11.22, up 7% year-over-year

Revenue: Total revenue was $123.0 million for the third quarter
of 2014, up 29% from $95.7 million for the third quarter of 2013.
Consumer revenue was $116.1 million for the third quarter of 2014, up
31% from $88.4 million for the third quarter of 2013. Enterprise
revenue was $6.9 million for the third quarter of 2014, compared with
$7.4 million for the third quarter of 2013.

Net Income: Net income was $5.7 million for the third quarter
of 2014, compared with net income of $6.5 million for the third
quarter of 2013. Net income per diluted share was $0.06 for the third
quarter of 2014 based on 98.4 million weighted-average shares
outstanding, compared with net income per diluted share of $0.07 for
the third quarter of 2013 based on 96.4 million weighted-average
shares outstanding.

Adjusted Net Income: Adjusted net income was $15.9 million for
the third quarter of 2014, compared with an adjusted net income of
$11.6 million for the third quarter of 2013. Adjusted net income per
diluted share was $0.16 for the third quarter of 2014 based on 98.4
million weighted-average shares outstanding, compared with an adjusted
net income per diluted share of $0.12 for the third quarter of 2013
based on 96.4 million weighted-average shares outstanding.

Adjusted EBITDA: Adjusted EBITDA was $17.9 million for the
third quarter of 2014, compared with $12.8 million for the third
quarter of 2013.

Cash Flow: Cash flow from operations was $26.1 million for the
third quarter of 2014, leading to free cash flow of $22.7 million
after taking into consideration $3.5 million of capital expenditures.
This compares with cash flow from operations of $18.2 million and free
cash flow of $16.6 million, after taking into consideration $1.6
million of capital expenditures, for the third quarter of 2013.

Balance Sheet: Total cash and marketable securities at the end
of the third quarter of 2014 was $238.3 million, up from $216.0
million at the end of the second quarter of 2014.

“LifeLock produced another strong set of results combining both growth
and profitability in the third quarter,” said Todd Davis, LifeLock’s
Chairman and CEO. “The launch of our new product portfolio was well
received, as we were pleased with the initial enrollment in the new
offerings. We believe that consumers are increasingly realizing the
superior value and functionality provided by our offerings compared with
those from the providers of legacy credit monitoring solutions.”

Please note that the results contained in this earnings release are
preliminary, and the final numbers will be reflected in the Form 10-Q
for the quarter ended September 30, 2014 that we will file with the
Securities and Exchange Commission. The issue involves the accounting
for share-based compensation, which we believe that we have been
overestimating. At this point, we believe that the dollar amounts
involved are approximately $8 million in total for the period beginning
January 1, 2013 and ending June 30, 2014, although it may impact prior
periods as well. The preliminary estimate from this adjustment has been
reflected in our results contained in this earnings release.
Accordingly, we have increased our GAAP net income for all periods
involved, but this had no impact on our previously reported adjusted
EBITDA, adjusted net income, and adjusted net income per share.

A reconciliation of GAAP to non-GAAP financial measures has been
provided in the financial statement tables included in this press
release. An explanation of these measures is also included below under
the heading “Non-GAAP Financial Measures.”

Third Quarter 2014 & Recent Business Highlights:

Recorded the 38th consecutive quarter of sequential growth
in revenue and cumulative ending members.

Added approximately 264,000 gross new members in the third quarter of
2014 and ended the quarter with approximately 3.52 million members.

Achieved a retention rate of 87.5% for the third quarter of 2014,
compared with 87.6% for the third quarter of 2013.

Increased monthly average revenue per member to $11.22 for the third
quarter of 2014 from $10.48 for the third quarter of 2013.

Announced a Beta version of LifeLock Privacy Monitor, a new offering
designed to help consumers easily find their personal information
online and take back control of this data in an effort to protect
their identity.

Supported the launch of the National PTA’s campaign #ShareAwesome, a
program designed to celebrate the positive use of digital and social
media and to empower families to make smart, safe decisions when using
the Internet and mobile devices.

Launched a new business relationship with national residential
mortgage lender PrimeLending, a PlainsCapital Company and subsidiary
of Hilltop Holdings (NYSE: HTH).

Guidance:

As of October 29, 2014, we are initiating guidance for our fourth
quarter of 2014 as well as updating our guidance for the full year 2014.

Fourth Quarter 2014 Guidance: Total revenue is expected to be
in the range of $127 million to $129 million. Adjusted net income per
diluted share is expected to be in the range of $0.26 to $0.27 based
on approximately 100 million fully diluted weighted-average shares
outstanding. Adjusted EBITDA is expected to be in the range of $29
million to $30 million.

Full Year 2014 Guidance: Total revenue is expected to be in the
range of $473 million to $475 million. Adjusted net income per diluted
share is expected to be in the range of $0.46 to $0.47 based on
approximately 99 million fully diluted weighted-average shares
outstanding and a cash tax rate of 5%. Adjusted EBITDA is expected to
be in the range of $54 million to $55 million. Free cash flow is
expected to be in the range of $82 million to $86 million.

Conference Call Details:

What: LifeLock third quarter 2014 financial results.

When: Wednesday, October 29, 2014 at 2PM PT (5PM ET).

Dial in: To access the call in the United States, please dial
(877) 407-3982, and for international callers dial (201) 493-6780.
Callers may provide confirmation number 13592811 to access the call
more quickly, and are encouraged to dial into the call 10 to 15
minutes prior to the start to prevent any delay in joining.

Replay: A replay of the call will be available via telephone
for seven days, beginning two hours after the call. To listen to the
telephone replay in the United States, please dial (877) 870-5176, and
for international callers dial (858) 384-5517 and enter access code
13592811.

About LifeLock

LifeLock,
Inc. (NYSE:LOCK) is a leading provider of proactive identity theft
protection services for consumers and risk management services for
enterprises. LifeLock’s threat detection, proactive identity alerts, and
comprehensive remediation services help provide peace of mind for
consumers amid the growing threat of identity theft. Leveraging unique
data, science and patented technology from ID Analytics, Inc., a wholly
owned subsidiary, LifeLock offers identity theft protection that goes
significantly beyond credit monitoring. As part of its commitment to
help fight identity theft, LifeLock works to train law enforcement and
partners with a variety of non-profit organizations to help consumers
establish positive habits to combat this threat.

Forward-Looking Statements

This press release contains “forward-looking” statements, as that term
is defined under the federal securities laws, including statements
regarding the expansion of our product portfolio, and our expected total
revenue, adjusted net income per diluted share, adjusted EBITDA, and
free cash flow for the fourth quarter of 2014 and for fiscal year 2014.
These forward-looking statements are based on our current assumptions,
expectations, and beliefs and are subject to substantial risks,
uncertainties, assumptions, and changes in circumstances that may cause
our actual results, performance, or achievements to differ materially
from those expressed or implied in any forward-looking statement.

The risks and uncertainties referred to above include, but are not
limited to, risks associated with our ability to maintain profitability
on an annual basis; our ability to protect our customers’ confidential
information; our ability to maintain and enhance our brand recognition
and reputation; the competitive nature of the industries in which we
conduct our business; our ability to maintain access to data sources;
our ability to retain our existing customers and attract new customers;
our ability to improve our services and develop and introduce new
services with broad appeal; our ability to maintain existing and secure
new relationships with strategic partners; the effects of laws,
regulations, and enforcement; the outcome of any litigation or
regulatory proceeding; our ability to protect our intellectual property
and not infringe on the intellectual property of others; and other “Risk
Factors” set forth in our most recent filings with the Securities and
Exchange Commission (the “SEC”).

Further information on these and other factors that could affect our
financial results and the forward-looking statements in this press
release is included in the filings we make with the SEC from time to
time, including our Form 10-K for the year ended December 31, 2013,
particularly under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.” Copies of these documents may be obtained by visiting our
Investor Relations website at http://investor.lifelock.com/
or the SEC's website at www.sec.gov.

We assume no obligation and do not intend to update these
forward-looking statements, except as required by law.

Non-GAAP Financial Measures

Our reported results include certain non-GAAP financial measures,
including adjusted net income, adjusted net income per diluted share,
adjusted EBITDA, and free cash flow. We calculate adjusted net income as
net income (loss) excluding amortization of acquired intangible assets,
share-based compensation, income tax benefits and expenses resulting
from changes in our deferred tax assets, and acquisition related
expenses. Historically, in calculating adjusted net income, we also
excluded changes in fair value of warrant liabilities and changes in
fair value of embedded derivatives in the periods in which those items
occurred. We do not currently have any warrant liabilities or embedded
derivatives. Accordingly, we will only include those items of income and
expense in our reconciliation of adjusted net income for
period-over-period comparisons. We calculate adjusted net income per
diluted share by dividing our adjusted net income by the
weighted-average diluted shares outstanding. We calculate adjusted
EBITDA as net income (loss) excluding depreciation and amortization,
share-based compensation, interest expense, interest income, other
income (expense), income tax (benefit) expense, and acquisition related
expenses. Historically, in calculating adjusted EBITDA, we also excluded
changes in fair value of warrant liabilities and changes in fair value
of embedded derivatives in the periods in which those items occurred. We
do not currently have any warrant liabilities or embedded derivatives.
Accordingly, we will only include those items of income and expense in
our reconciliation of adjusted EBITDA for period-over-period
comparisons. We define free cash flow as net cash provided by (used in)
operating activities less net cash used in investing activities for
acquisitions of property and equipment.

We have included adjusted net income, adjusted net income per diluted
share, and adjusted EBITDA in this press release because they are key
measures used by us to understand and evaluate our core operating
performance and trends, to prepare and approve our annual budget, and to
develop short- and long-term operational plans. In particular, the
exclusion of certain expenses in calculating adjusted net income and
adjusted EBITDA can provide a useful measure for period-to-period
comparisons of our core business. Additionally, adjusted EBITDA is a key
financial measure used in determining management’s incentive
compensation.

We have included free cash flow in this press release because we believe
it typically presents a more conservative measure of cash flow as
purchases of property and equipment are necessary components of ongoing
operations. We believe that this non-GAAP financial measure is useful in
evaluating our business because free cash flow reflects the cash surplus
available to fund the expansion of our business after payment of capital
expenditures relating to the necessary components of ongoing operations.
We also believe that the use of free cash flow provides consistency and
comparability with our past financial performance, facilitates
period-to-period comparisons of operations, and also facilitates
comparisons with other companies, many of which use similar non-GAAP
financial measures to supplement their GAAP results.

Although adjusted net income, adjusted EBITDA, and free cash flow are
frequently used by investors in their evaluations of companies, these
non-GAAP financial measures have limitations as analytical tools and
should not be considered in isolation or as a substitute for financial
information presented in accordance with GAAP. Because of these
limitations, these non-GAAP financial measures should be considered
alongside other financial performance measures.

We have not reconciled adjusted net income per diluted share guidance to
net income per diluted share guidance or adjusted EBITDA guidance to net
income guidance because we do not provide guidance for share-based
compensation expense, provision for income taxes, interest income,
interest expense, change in fair value of warrant liabilities, change in
fair value of embedded derivatives, other income and expenses,
depreciation expense, amortization of intangible assets, acquisition
expenses, or income tax (benefit) expense, which are reconciling items
between net income (loss) and adjusted net income and net income (loss)
and adjusted EBITDA. As items that impact net income (loss) are out of
our control and/or cannot be reasonably predicted, we are unable to
provide such guidance. Accordingly, reconciliation to net income (loss)
is not available without unreasonable effort. For a reconciliation of
historical non-GAAP financial measures to the nearest comparable GAAP
measures, see the reconciliation tables included in this press release.

LifeLock, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended September 30,

Nine Months EndedSeptember 30,

2014

2013

2014

2013

Revenue

Consumer revenue

$

116,115

$

88,386

$

326,448

$

246,053

Enterprise revenue

6,916

7,353

19,882

21,300

Total revenue

123,031

95,739

346,330

267,353

Cost of services

30,327

24,887

89,682

73,866

Gross profit

92,704

70,852

256,648

193,487

Costs and expenses:

Sales and marketing

51,672

40,427

166,505

125,294

Technology and development

12,341

10,444

37,968

29,538

General and administrative

16,721

11,252

45,221

30,734

Amortization of acquired intangible assets

2,231

1,966

6,693

5,898

Total costs and expenses

82,965

64,089

256,387

191,464

Income from operations

9,739

6,763

261

2,023

Other income (expense):

Interest expense

(89

)

(82

)

(264

)

(228

)

Interest income

73

29

189

75

Other

(134

)

(7

)

(151

)

(11

)

Total other expense

(150

)

(60

)

(226

)

(164

)

Income before provision for income taxes

9,589

6,703

35

1,859

Income tax expense

3,905

223

18

218

Net income

$

5,684

$

6,480

$

17

$

1,641

Net income per share:

Basic

$

0.06

$

0.07

$

0.00

$

0.02

Diluted

$

0.06

$

0.07

$

0.00

$

0.02

Weighted-average common shares outstanding used in computing net
income per share:

Basic

92,925

89,318

92,437

87,841

Diluted

98,373

96,395

98,531

95,310

The results above and the financial tables below have been revised to
correct an overstatement of non-cash expense of approximately $8 million
for the period January 1, 2013 through June 30, 2014 associated with
stock-based compensation expense.

LifeLock, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(Unaudited)

September 30,

December 31,

2014

2013

Assets

Current assets:

Cash and cash equivalents

$

128,629

$

123,911

Marketable securities

109,706

48,688

Trade and other receivables, net

8,863

10,906

Deferred tax assets, net

13,170

13,117

Prepaid expenses and other current assets

7,662

6,961

Total current assets

268,030

203,583

Property and equipment, net

21,663

16,504

Goodwill

159,342

159,342

Intangible assets, net

40,520

47,213

Deferred tax assets, net – non-current

34,733

34,796

Other non-current assets

5,432

1,812

Total assets

$

529,720

$

463,250

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

7,532

$

2,422

Accrued expenses and other liabilities

46,051

34,926

Deferred revenue

145,848

119,106

Total current liabilities

199,431

156,454

Other non-current liabilities

6,256

4,640

Total liabilities

205,687

161,094

Commitments and contingencies

Stockholders’ equity:

Common stock

93

91

Additional paid-in capital

487,777

465,853

Accumulated other comprehensive loss

(84

)

(18

)

Accumulated deficit

(163,753

)

(163,770

)

Total stockholders’ equity

324,033

302,156

Total liabilities and stockholders’ equity

$

529,720

$

463,250

LifeLock, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Nine Months Ended

September 30,

2014

2013

Operating activities

Net income

$

17

$

1,640

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

12,259

9,484

Share-based compensation

12,735

7,798

Provision for doubtful accounts

333

220

Amortization of premiums on marketable securities

1,213

-

Deferred income tax expense

10

58

Other

39

28

Changes in operating assets and liabilities:

Trade and other receivables

566

(3,698

)

Prepaid expenses and other current assets

(701

)

413

Other non-current assets

716

380

Accounts payable

5,282

831

Accrued expenses and other liabilities

11,303

5,993

Deferred revenue

26,742

24,939

Other non-current liabilities

1,617

3,741

Net cash provided by operating activities

72,131

51,827

Investing activities

Acquisition of property and equipment

(11,127

)

(5,264

)

Purchases of marketable securities

(95,686

)

(24,247

)

Maturities of marketable securities

34,418

-

Purchase of company-owned life insurance policies

(4,337

)

-

Net cash used in investing activities

(76,732

)

(29,511

)

Financing activities

Proceeds from share-based compensation plans

9,704

11,815

Proceeds from warrant exercises

375

Payments for employee tax withholdings related to restricted stock

(760

)

-

Payments for debt issuance costs

-

(440

)

Net cash provided by financing activities

9,319

11,375

Net increase in cash and cash equivalents

4,718

33,691

Cash and cash equivalents at beginning of period

123,911

134,197

Cash and cash equivalents at end of period

$

128,629

$

167,888

Share-Based Compensation

(in thousands)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2014

2013

2014

2013

Cost of services

$

334

$

162

$

918

$

523

Sales and marketing

615

392

2,029

935

Technology and development

867

764

3,737

1,803

General and administrative

2,280

1,587

6,051

4,537

Total share-based compensation expense

$

4,096

$

2,905

$

12,735

$

7,798

Key Financial and Operating Metrics

(in thousands except percentages and per member data)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2014

2013

2014

2013

Revenue

Consumer revenue

$

116,115

$

88,386

$

326,448

$

246,053

Enterprise revenue

6,916

7,353

19,882

21,300

Total revenue

$

123,031

$

95,739

$

346,330

$

267,353

Adjusted net income

$

15,909

$

11,595

$

19,455

$

15,394

Adjusted EBITDA

$

17,929

$

12,791

$

25,255

$

19,305

Free cash flow

$

22,653

$

16,629

$

61,004

$

46,563

Cumulative ending members

3,524

2,864

3,524

2,864

Gross new members

264

218

912

698

Member retention rate

87.5

%

87.6

%

87.5

%

87.6

%

Average cost of acquisition per member

$

184

$

172

$

173

$

167

Monthly average revenue per member

$

11.22

$

10.48

$

11.02

$

10.17

Enterprise transactions

66,104

53,042

173,360

159,850

Reconciliation of GAAP to Adjusted Results

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2014

2013

2014

2013

Reconciliation of Gross Profit to Adjusted Gross Profit

Gross profit

$

92,704

$

70,852

$

256,648

$

193,487

Share-based compensation

334

162

918

523

Adjusted gross profit

$

93,038

$

71,014

$

257,566

$

194,010

Reconciliation of Sales and Marketing Expenses to Adjusted Sales
and Marketing Expenses

Sales and marketing expenses

$

51,672

$

40,427

$

166,505

$

125,294

Share-based compensation

(615

)

(392

)

(2,030

)

(935

)

Adjusted sales and marketing expenses

$

51,057

$

40,035

$

164,475

$

124,359

Reconciliation of Technology and Development Expenses to Adjusted
Technology and Development Expenses

Technology and development expenses

$

12,341

$

10,444

$

37,969

$

29,538

Share-based compensation

(867

)

(764

)

(3,738

)

(1,803

)

Adjusted technology and development expenses

$

11,474

$

9,680

$

34,231

$

27,735

Reconciliation of General and Administrative Expenses to Adjusted
General and Administrative Expenses

General and administrative expenses

$

16,721

$

11,252

$

45,220

$

30,734

Share-based compensation

(2,280

)

(1,587

)

(6,049

)

(4,537

)

Adjusted general and administrative expenses

$

14,441

$

9,665

$

39,171

$

26,197

Reconciliation of Income (from Operations to Adjusted Income from
Operations

Income from operations

$

9,739

$

6,763

$

261

$

2,023

Share-based compensation

4,096

2,905

12,735

7,798

Amortization of acquired intangible assets

2,231

1,966

6,693

5,898

Adjusted income from operations

$

16,066

$

11,634

$

19,689

$

15,719

Reconciliation of Net Income to Adjusted Net Income

Net income

$

5,684

$

6,480

$

17

$

1,641

Amortization of acquired intangible assets

2,231

1,966

6,693

5,898

Deferred income tax expense

3,898

244

10

57

Share-based compensation

4,096

2,905

12,735

7,798

Adjusted net income

$

15,909

$

11,595

$

19,455

$

15,394

Three Months Ended September 30,

Nine Months Ended September 30,

2014

2013

2014

2013

Reconciliation of Diluted Shares to Adjusted Diluted Shares

Diluted shares

98,373

96,395

98,531

95,310

Dilutive securities excluded due to net loss available fordistribution

-

-

-

-

Adjusted diluted shares

98,373

96,395

98,531

95,310

Reconciliation of Net Income per Diluted Share to Adjusted Net
Income per Diluted Share